Easy Trip Planners: Online Travel Portal Shares Have Surged To Post-IPO High But Pandemic Continues To Pose Significant Risks

Easy Trip Planners (ETP), the company that owns the Online Travel Agent (OTA) EaseMyTrip.com, went public in March 2021. The ₹510-crore initial public offering of ETP was oversubscribed 159.30 times. Since listing, shares of ETP have doubled.

The OTA offers a comprehensive range of travel-related products and services for end-to-end travel solutions, including airline tickets, hotels and holiday packages, rail tickets, bus tickets and taxis as well as ancillary value added services such as travel insurance, visa processing and tickets for activities and attractions.

The company’s products and services are organised primarily in the following segments:

(i) airline tickets (94% of revenues);

(ii) hotels & holiday packages (5% of revenues) and

(iii) other services (0.6% of revenue).

Despite travel being derailed by Covid, the company has grown its sales at a compounded annual growth rate of 25 per event over the last three years. Its EBIDTA has grown at a CAGR of 220 per cent, while the margins have increased from 3.1 per cent in FY18 to 45 per cent for the first nine months of FY21.

The company offers the ability to search, compare and book reservations at more than 73,400 hotels in India and more than 1,023,000 hotels outside India, as of December 31, 2020.

While the company originally offered a portal for travel agents to buy airline tickets, it soon began B2C operations as well. The company provides airline tickets for domestic travel and international travel from and to other countries including India.

Its main sources of revenues are commissions and incentive payments, such as performance linked bonuses, are primarily received from GDS service providers and certain airlines as well as credit card companies on a periodic basis and are generally based on the volume of sales generated by the company.

In addition, ETP also earns revenue from convenience fee, cancellation service charges, rescheduling charges and advertisement revenue that it may charge along with the travel booking. Given the agent model that the company works on, it does not have to take on any inventory risks. The company has so far recorded a repeat transaction rate of 86 per cent in the B2C channel.

Key Concerns:

Loan Write-Offs & Related Party Transactions:

The company has provided financial assistance to movie producers and other branding companies for advertisement and branding of travel, tour and ticketing business during the making and release of movies and award functions as well as provided loans for business operations to certain companies. These loans included loans provided to certain related parties as well. The company had written off some of these advances, which were considered as no longer receivable. Such transactions with related parties, is a red flag.

Intense Competition:

Companies like MakeMyTrip, Expedia, Booking.com and Agoda, dominate the OTA space in India. Due to their size and reach, hotels and airlines often provide them with lower rates, purposely creating rate disparity, resulting in lower sales from other OTAs.

ETP also competes with traditional players like travel agents, travel companies and non-traditional players like payments platforms, search engines, meta-search engines etc. Both hotels and airlines are also focusing on growing their own direct distribution channels by offering lower rates and other advantages to direct bookers. With a higher digital spend, it is possible that the share of OTAs and other players go lower as customers buy directly from official sites.

The Pandemic:

The Covid-19 pandemic has severely restricted the travel & tourism sector. Domestic and international travel restrictions imposed in India materially disrupted the company’s revenues. Such restrictions have continued for the greater part of the nine months ended December 31, 2020 with only some domestic travel and government approved international travel operations commencing in June 2020. This has resulted in a reduction in the company’s gross booking revenue and gross booking volumes.

The Covid-19 pandemic could continue to impede global economic activity, even as restrictions are lifted, leading to reduce per capita income and disposable income.

Currently, in India, the leisure travellers are often going for small-distance trips, therefore, ETP’s airline ticketing service might not be able to scale up to its full potential.